PIJIP/KEI Panel on Barton/Pfizer Proposal for Price Discrimination in Middle and Low-Income Nations

On February 19, 2009, Washington College of Law Program
on Information Justice and Intellectual Property (PIJIP) & Knowledge Ecology International (KEI) hosted
a roundtable discussion featuring Stanford Professor of Law Emeritus John Barton
and Pfizer Vice President of International Trade and Tax Joseph Damond. This
event was a discussion of their proposal, outlined in a letter to Senator Max Baucus, for a
framework to “protect our patents abroad but also demonstrate flexibility and
compassion with respect to public health crises in the developing
world.”

The letter proposes that developed countries implement pricing
and reimbursement policies which ensure they “pay an adequate price to encourage
research.” It supports allowing least developed countries to wait until 2016 to
implement tougher intellectual property rules mandated by the TRIPS Agreement.
Most notably, Barton and Damond’s global drug and research access agenda
contemplates a pricing scheme for middle-income countries, such as Brazil,
China, and India, which would increase the price that the richest in those
countries pay for medicines while allowing lower prices for the poor. Barton and
Damond describe this as ensuring that the richest in developing countries would
contribute to the support of pharmaceutical R&D.

Many advocates for
international access to medicine are concerned with the policies proposed in the
Barton/Damond letter, and were eager to share their perceptions of the proposal.
In addition to Professor John Barton of Stanford University and Joseph Damond of
Pfizer, participants in the roundtable discussion included: Professor Brook
Baker of Northeastern University, Professor Sean Flynn of American University
Washington College of Law, James Love of Knowledge Ecology International, Rohit
Malpani of Oxfam, Peter Riggs of Forum on Democracy and Trade, and Maine State
Representative Sharon Treat.

Professor Barton discussed four main points
during the KEI/PIJIP meeting. The first was the importance of government
reimbursements to incentivize further drug development and to reduce the costs
of new health care technology. Second, intellectual property has been a barrier
to access in the past but prices in poor countries are now low, so it is
important to charge prices that can support R&D where they are affordable,
and to prevent piracy. Third, Barton proposed that the wealthiest in
middle-income countries like Brazil, China, and India, should pay more to
support medical R&D. Lastly, these three points could be the framework for a
future WTO treaty.

Joseph Damond briefly added some details about the way
in which Pfizer is working to develop neglected diseases that disproportionately
affect the poor. He also noted that people and governments in wealthier
countries support most medical R&D in the world through their drug
purchases.

Professor Sean Flynn addressed the problems of attempting
price discrimination in nations with highly unequal income distributions. Using
income statistics from South Africa as an example, he showed that the profit
maximizing price in a country where the elite has a disproportionate share of
resources will price out over 80% of the population. Even within the wealthiest
20% of the population, those in the middle and lower end of the distribution
would have trouble affording monopoly prices. If the South African market was to
be segmented so the ‘rich’ obtained medicine through private sector insurance
companies, and the ‘poor’ obtained them through the government, many working
people would earn too much to qualify for the public sector, but would still be
unable to afford insurance with adequate drug coverage. [Later, Joe Damon
responded by asserting there is ‘no market’ in most countries – at least
developed countries – because drug firms negotiate prices with the
government.]

Professor Brook Baker pointed out that price discrepancies
give additional incentives for piracy. State Representative Treat expressed her
uneasiness with any program that would interfere with a state’s ability to
operate its own Medicaid and health care safety net programs. She pointed out
that in a recession, states’ obligations to provide healthcare through Medicaid
increase as people with employer-provided insurance lose their jobs.

Peter Riggs of the Forum of Democracy and Trade and Sharon Treat both
expressed concern with the way in which international trade agreements have
regulated Medicare and Medicaid Programs. They highlighted the importance of
Medicaid remaining state programs, governed by state leadership. In response,
Mr. Damond noted that in establishing free trade agreements, drafters never
intended that state health programs would be addressed in international trade
agreements.

Rohit Malpani of Oxfam highlighted three main points. First,
the glaring absence of civil society participation in the Barton/Damond proposal
weakens it, because it is impossible for policymakers to know what would be best
for developing countries if they do not talk to local leaders and healthcare
providers. Second, excessive privatization of healthcare in developing countries
has made it nearly impossible for many in middle income countries to receive
healthcare at all. Finally, intellectual property issues have not been resolved.
At the end of the day, it is generic competition that ensures medicines will
reach the poorest.

James Love urged Barton and Damond to seek more input
from representatives of middle and low income countries and global health
advocates, who could offer them a new perspective. Love argued that the real
economic problem is not pricing of drugs, but decoupling medicine research and
development costs from the costs that the end user pays. He cited WHO’s
Inter-Governmental Working Group’s proposal for developing TB and Chagas
treatments in Barbados and Bolivia as an example of a method for decoupling
these costs. The Barbados and Bolivia plan would set aside a portion of each
country’s GDP to go to medicine research and development and would require that
medicines developed with those funds enter a patent pool that all participating
drug manufacturers could access.